Second mortgage

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A second mortgage is a secured loan (or mortgage) that is subordinate to another loan against the same property. More specifically, the second loan in sequence.

In real estate, a property can have multiple loans against it. The loan which is registered with county or city registry first is called the first mortgage. The loan registered second is called the second mortgage. A property can have a third or even fourth mortgage, but those are more rare.

Second mortgages are called subordinate because, if the loan goes into default, the first mortgage gets paid off first before the second mortgage gets any money. Thus, second mortgages are riskier for the lender, who generally charges a higher interest rate. The last thing that can be added is; you should only buy what you can afford. If you are taking a second mortgage,it means you are running a risk of putting yourself into deeper debt. Which therefore could create more risk than return for you.